PAMANTASAN NG LUNGSOD NG MAYNILA

(University of the City of Manila)

Intramuros, Manila
COLLEGE OF MANAGEMENT AND ENTREPRENEURSHIP

TOTAL QUALITY MANAGEMENT

SIX SIGMA
WRITTEN REPORT

Submitted by: Group III

MEMBERS
1. Almando, Ray Christiene
2. Bagus, Reinier Jerome
3. Bautista, Kimberly
4. Bonilla, Angelica
5. Catacutan, Jereny
6. Manalac, Billy
7. Molina, Jovelle
8. Paloma, Goldie Gail
9. Perez, Rojimel
10. Pineda, Randy
11. Rodriguez,Rinzel Cerriza
12. Sacote, Norman Nickson
13. Ventura, Jann Criztofer

Submitted to:
Prof. Fe Garabiles- Espinosa

A. Meaning of Six Sigma (Jovelle)

Six Sigma is a management philosophy developed by Motorola that emphasizes setting
extremely high objectives, collecting data, and analyzing results to a fine degree as a way to
reduce defects in products and services. The Greek letter sigma is sometimes used to denote
variation from a standard. Six Sigma seeks to improve the quality of process outputs by
identifying
and
removing
the
causes
of
defects
(errors)
and
minimizing
variability in manufacturing and business processes.
B. History of Six Sigma (Kim)
The roots of Six Sigma as a measurement standard can be traced back to Carl Friedrich Gauss
(1777-1855) who introduced the concept of the normal curve. Six Sigma as a measurement
standard in product variation can be traced back to the 1920s when Walter Shewhart showed
that three sigma from the mean is the point where a process requires correction. Many
measurement standards (Cpk, Zero Defects, etc.) later came on the scene but credit for coining
the term Six Sigma goes to a Motorola engineer named Bill Smith. (Incidentally, Six Sigma is
a federally registered trademark of Motorola).
In the early and mid-1980s with Chairman Bob Galvin at the helm, Motorola engineers decided
that the traditional quality levels measuring defects in thousands of opportunities didnt
provide enough granularity. Instead, they wanted to measure the defects per million
opportunities. Motorola developed this new standard and created the methodology and needed
cultural change associated with it. Six Sigma helped Motorola realize powerful bottom-line
results in their organization in fact, they documented more than $16 Billion in savings as a
result of our Six Sigma efforts. Motorola saved $16 billion from 1986 to 2004, reflecting
hundreds of individual successes in all Motorola business areas including, Sales and marketing,
Product design, Manufacturing, Customer service, Transactional processes and Supply chain
management.
Since then, hundreds of companies around the world have adopted Six Sigma as a way of
doing business. This is a direct result of many of Americas leaders openly praising the benefits
of Six Sigma. Leaders such as Larry Bossidy of Allied Signal (now Honeywell) and Jack Welch
of General Electric Company. Rumor has it that Larry and Jack were playing golf one day and
Jack bet Larry that he could implement Six Sigma faster and with greater results at GE than
Larry did at Allied Signal. The results speak for themselves.
Six Sigma has evolved over time. Its more than just a quality system like TQM or ISO. Its a way
of doing business. As Geoff Tennant describes in his book Six Sigma: SPC and TQM in
Manufacturing and Services: Six Sigma is many things, and it would perhaps be easier to list all
the things that Six Sigma quality is not. Six Sigma can be seen as: a vision; a philosophy; a
symbol; a metric; a goal; a methodology.
C. Companies Implementing Six Sigma (Billy)
Six Sigma-based Training Leads to Better Problem Resolution at Convergys
As a result of this training program, the Convergys client paid a lower cost of outsourcing,

Convergys got higher rate for each transaction, agents received higher incentives and the
problem got resolved faster for the clients customers. The problem resolution score improved by
10% i.e. 10% more calls were successfully handled (problem resolved) within the first call.
Clearly, this meant 10% improvement in productivity. Moreover, the economic impact of this
improvement effort exceeded Convergys INR 5.8 crores ( USD 1.18 MM @ Rs 49= 1 USD).
This economic benefit is the total of the benefit accrued to the client, to Convergys and to its
employees. Says Manisha, The client gained as they pay per call and since we improved first
call resolution by 10%, they paid for 10% less calls post the improvement. Convergys gained as
we received the highest possible call.
Best Practices: Measuring the Success of Enterprise Testing at Dell, Inc.
A good approach to measurement is provided by the Six Sigma framework, which describes
four families of measures. These families are known as the PFQT measures, which detail the
productivity (process), financials (cost), quality, and timeliness (schedule) of a project. An
effective measurement strategy includes metrics that address these four areas.
Six Sigma Can Help Project Managers Improve Results at Microsoft

Improving business results is important in every organization. Project managers are often the
change agents charged with leading the improvement efforts. Understanding and incorporating
the Six Sigma DMAIC steps into every project can help project managers not only be more
effective but can lead to breakthrough results. Attaining a Six Sigma Green Belt certification is
the best approach for project managers who want to demonstrate that they are ready to accept
the challenge of improving their organizations business results.

Six Sigma Still Pays Off At Motorola

Six Sigmas stamp is all over the Razr, says Michael S. Potosky, Motorolas corporate director
of Six Sigma. Engineers, for instance, applied the process to the phones antenna, helping keep
it hidden while maintaining call clarity. With hits like the Razr, the Schaumburg (Ill.) company
has climbed from a 15.4% market share in mobile phones to 22.4% over the past two years.
Motorola netted $4.6 billion on $36.8 billion in revenues last year, helping it earn the No. 13 spot
on the BusinessWeek 50 list of top corporate performers.

Xerox Lean Six Sigma and Quality Go Hand in Hand

Xerox Lean Six Sigma is a powerful business-improvement tool that can enhance the
effectiveness of Xerox and of the services we provide to our customers. It leads to solutions that
no one person could ever develop alone. And the return on investment can be huge. The Xerox

Lean Six Sigma tools, processes and principles are built on earlier Leadership Through Quality
and new quality efforts at Xerox. Since 2003, Xerox people have been using Xerox Lean Six
Sigma tools and methods in both internal projects and projects for customers. These projects
focus on reducing waste and increasing effectiveness in vital business processes to bring
measurable improvements in results for customers and the company.

D. Approaches of Six Sigma (Jann & Mayor)

1. DMAIC (an abbreviation for Define, Measure, Analyze, Improve and Control) refers to a
data-driven improvement cycle used for improving, optimizing and stabilizing business
processes and designs. The DMAIC improvement cycle is the core tool used to drive Six
Sigma projects. However, DMAIC is not exclusive to Six Sigma and can be used as the
framework for other improvement applications.
Define
The purpose of this step is to clearly articulate the business problem, goal, potential resources,
project scope and high-level project timeline. This information is typically captured within project
charter document. Write down what you currently know. Seek to clarify facts, set objectives and
form the project team. Define the following:

A problem
The customer(s)
Voice of the customer (VOC) and Critical to Quality (CTQs) what are the critical
process outputs?
The target process subject to DMAIC and other related business processes
Project targets or goal
Project boundaries or scope
A project charter is often created and agreed upon during the Define step.

Measure
The purpose of this step is to objectively establish current baselines as the basis for
improvement. This is a data collection step, the purpose of which is to establish process
performance baselines. The performance metric baseline(s) from the Measure phase will be
compared to the performance metric at the conclusion of the project to determine objectively
whether significant improvement has been made. The team decides on what should be
measured and how to measure it. It is usual for teams to invest a lot of effort into assessing the
suitability of the proposed measurement systems. Good data is at the heart of the DMAIC
process:

Identify the gap between current and required performance.

Collect data to create a process performance capability baseline for the project metric,
that is, the process Y(s) (there may be more than one output).
Assess the measurement system (for example, a gauge study) for adequate accuracy
and precision.

Establish a high level process flow baseline. Additional detail can be filled in later.

Analyze
The purpose of this step is to identify, validate and select root cause for elimination. A large
number of potential root causes (process inputs, X) of the project problem are identified via root
cause analysis (for example a fishbone diagram). The top 3-4 potential root causes are selected
using multi-voting or other consensus tool for further validation. A data collection plan is created
and data are collected to establish the relative contribution of each root causes to the project
metric, Y. This process is repeated until "valid" root causes can be identified. Within Six Sigma,
often complex analysis tools are used. However, it is acceptable to use basic tools if these are
appropriate. Of the "validated" root causes, all or some can be

List and prioritize potential causes of the problem

Prioritize the root causes (key process inputs) to pursue in the Improve step

Identify how the process inputs (Xs) affect the process outputs (Ys). Data is analyzed to
understand the magnitude of contribution of each root cause, X, to the project metric, Y.
Statistical tests using p-values accompanied by Histograms, Pareto charts, and line plots
are often used to do this.

Detailed process maps can be created to help pin-point where in the process the root
causes reside, and what might be contributing to the occurrence.

Improve
The purpose of this step is to identify, test and implement a solution to the problem; in part or in
whole. Identify creative solutions to eliminate the key root causes in order to fix and prevent
process problems. Use brainstorming or techniques like Six Thinking Hats and Random Word.
Some projects can utilize complex analysis tools like DOE (Design of Experiments), but try to
focus on obvious solutions if these are apparent.

Create innovative solutions

Focus on the simplest and easiest solutions

Test solutions using Plan-Do-Check-Act (PDCA) cycle

Based on PDCA results, attempt to anticipate any avoidable risks associated with the
"improvement" using FMEA

Create a detailed implementation plan

Deploy improvements

Control
The purpose of this step is to sustain the gains. Monitor the improvements to ensure continued
and sustainable success. Create a control plan. Update documents, business process and
training records as required.
A Control chart can be useful during the Control stage to assess the stability of the
improvements over time by serving as 1. a guide to continue monitoring the process and 2.

provide a response plan for each of the measures being monitored in case the process
becomes unstable.
2. DMADV is also known as DFSS, Design For Six Sigma
1. DEFINE design goals that are consistent with customer demands and the enterprise
strategy
2. MEASURE and identify CTQs (characteristics that are Critical To Quality), product
capabilities, production process capability and risks.
3. ANALYZE to develop and design alternatives, create a high-level design and evaluate
design capability to select the best design.
4. DESIGN details, optimize the design, and plan for design verification. This phase may
require simulations.
5. VERIFY the design, set up pilot runs, implement the production process and hand it
over to the process owners.
E. SIX SIGMA TOOLS
Ishikawa Diagram ( Nickson & Bagus)
The Ishikawa diagram also known as the cause and effect diagram is a tool used in the Six
Sigma quality control concept for discovering all the possible causes of a problem especially
the root cause. The aspect in focus is normally related to service quality or efficiency of a factor
of production such as machine compatibility, specification, and variance in delivery time and so
on.
The Ishikawa diagram acts as a first line for the solution of problems by exhaustively generating
possible causes. This creates a visual or pictographic representation of a process and leads to
the immediate identification of possible causes for issues. A pictographic representation of a
problem gives team members a better insight into the problem, making problem resolution faster
and easier.
The Ishikawa diagram is usually applied in Six Sigma processes because it has the ability to
paint an accurate picture of a problem and its possible causes in preparation for proper
analysis. This particular diagram enables managers diagnose problems and properly analyze
the processes involved in production. The ability to diagnose a problem will lead to a prompt
resolution and future prevention of the problem.
In solving complex issues, many factors related to the problem have to be considered, and their
relationship with the problem in focus has to be defined. The Ishikawa diagram was created by
Professor Kaoru Ishikawa of the Tokyo University Japan. It is used to breakdown complex
problems into simpler solvable blocks. Breaking down complex problems gives a better
perspective of the cause and the influencing factors of breakdown within a process.

This diagram makes complex problems appear simple in the eyes of the business proprietors
through visual aid.
In summary, the Ishikawa diagram, permits an in depth analysis and evaluation exhaustively
exploring possible causes and presenting solutions to a problem. It is easy to implement and
creates a visual representation of a problem and possible causes making it easy to understand.
It focuses a Six Sigma team on the bigger picture of possible causes, and gives a better
understanding of the problem in order to help provide failsafe solutions to future reoccurrence. It
shows weak areas in a solution and makes room for contingency plans in the event that the
solution does not give the desired effect.
Step I
Identify the process effect to be analyzed. Develop an Operational Definition to ensure that it is
clearly understood. Write the effect in a box on the right side and draw a horizontal arrow from
left to right that touches the box as illustrated in the figure below.

Step II
Identify the main categories of causes resulting in the effect under consideration. These
categories can easily be selected from the applicable six key process elements. These process
elements are people, environment, material, method, machinery, and measurement. Add
selected categories in the diagram as illustrated in the following figure.

Step III
Identify as many causes under each category and add them to the corresponding category.
Detail each cause further (recursively) to the lowest level possible.

Analyze this diagram to identify the causes that require deeper investigation. As fishbone
diagram identify only potential causes, it may be a good idea to use a Pareto Chart to determine
the cause(s) to focus on first.
Benchmarking (Jereny & Jovelle)
Benchmarking is a standard by which something can be measured or judged. This term was
first used by surveyors. They set a benchmark by marking a point of known vertical elevation.
Therefore benchmark becomes a point of reference for a measurement.
We benchmark every day. We compare our performance, lifestyle, or a game of golf with friends
and peers.

What is benchmarking in a business environment? It involves making comparisons with other

businesses, so that we can develop an objective assessment of our business. It helps us to a)
identify areas for breakthrough improvements, b) establish higher targets, and c) new priorities.
Note benchmarking is not simple comparison and subsequent blind copy of what seems to be
the best. We must carefully analyze the outcome of benchmarking and focus on what adds
maximum value in our business context. There are three types of benchmarking.
Internal Benchmarking
It compares (critical-to-business) processes or products across the organization on key criticalto-quality parameters such as turn-around-time or cost.
Functional Benchmarking
It compares similar functions or processes with industry leaders in that area.
Competitive Benchmarking
It focuses on direct competitors in terms of their products, services, processes, and customers.
The following flowchart summarizes the benchmarking processes.

Some of the simple and common candidates for benchmarking are customer satisfaction,
critical-to-business processes, products, profitability, and value addition per employee. The list is
endless. We need to shortlist what is critical to our business success.
Benchmarking is one of the first key steps in any Six Sigma DMAIC project.
Pareto Analysis (Ray & Roji)
Pareto chart is a Lean and Six Sigma tool. Pareto chart can be used in Pareto Analysis to
perform root cause analysis. Pareto rule is also known as 80/20 rule since it states that 80% of
the problems are caused by 20% of the causes or issues. Pareto Chart or Pareto Diagram is
named after the Italian economist Vilfredo Pareto of the 19 th century.
Data for Pareto Analysis
Take the example of customer returns of toys made by a toy manufacturer. Start collecting data
about these rejections over a fixed time period, say one month. 854 data points have been
collated and grouped into 5 categories:
1.
2.
3.
4.
5.

Category 1 (Example: Damaged Packaging) 155 Occurrences

Category 2 (Example: Color Faded) 221 Occurrences
Category 3 (Example: Missing Part) 33 Occurrences
Category 4 (Example: Missing Brochure) 112 Occurrences
Category 5 (Example: Wrong Toy Sent) 333 Occurrences

Take the above defect categories and sort them in descending order based on the frequency of
the problem occurrences.
1.
2.
3.
4.
5.

Category 5 333 Occurrences percentage of total occurrences = 333 854 = 38.99

%
Category 2 221 Occurrences percentage of total occurrences = 221 854 = 25.88
%
Category 1 155 Occurrences percentage of total occurrences = 155 854 = 18.15
%
Category 4 112 Occurrences percentage of total occurrences = 112 854 =
13.11%
Category 3 33 Occurrences percentage of total occurrences = 33 854 = 3.86%

Create one more column and place the cumulative percentage of the frequency. Notice that for
the Category 5 the cumulative frequency percentage is same as the frequency percentage. For
the next category Category 2, some of category 5 and 2 which amounts to 38.99+ 25.88 =
64.87. For the next category in list the cumulative is 38.99+ 25.88 + 18.15 = 83.02 and so on.
Finally the last category, category 3 has a cumulative frequency percentage of 100%.
.

Create a Pareto Chart to represent the above the data graphically. Pareto chart is a bar chart
with line chart overlay-ed on top of the bar chart. The bar chart represents the categories with
the frequencies in descending order. We use the left Y Axis to represent the values and X Axis
to represent the categories. The line chart represents the Cumulative Frequency percentage.
We used the secondary Y axis to represent the line chart values since the scales or ranges of
these values do not match.

The above chart shows all the defect categories clearly in descending order in a bar chart along
with the cumulative frequency of occurrence as a line chart with values on the secondary Y axis.
Pareto Analysis based on the above Pareto Chart
Pareto Analysis is analyzing the data from the above chart and finding out where the line graph
crosses 80% mark on the secondary Y axis (right hand side). Then find out all the categories to
the left of that point which are vital few or most significant factors. The remaining categories
(or factors) are called Useful Many and they are less significant.
Vital Few = Categories with cumulative freq 80 below = Categories 5,2,1
Useful Many = Categories with cumulative freq 80 above = Categories 3,4
Pareto Chart and Analysis Summary

Pareto Charts help finding which issues are causing most problems
Pareto Charts are used in root cause analysis
Pareto Charts are a decision making tool and do not contain data such as detail data
analysis and costs of failure.
Pareto analysis results in finding the efforts where it will have the most impact.
Pareto Charts decide the order in which the issues will be addressed.

 Cost- Benefit Analysis (Cheng & Goldie)

Cost benefit analysis is one of the most used tools in Six Sigma. It is simply a decision making
tool that makes a thorough comparison between negative and positive results. Negative results
in this case are costs and positive results are the benefits to be achieved once the costs are
incurred.
In other words, it is a technique used to determine how successful, or unsuccessful, thereof, a
planned action will be. Since the evaluation relies on the addition of all possible positive factors
and the removal of all possible negative factors to be able to determine the net result, some
people refer to cost benefit analysis as running the numbers. Here is how the process is done.
The process will basically find, quantify, and add all possible positive factors that relate to the
expected outcome. Then it identifies, quantifies, and removes all the negative factors that are
likely to influence the results-this is the cost.

The difference achieved between the two is what indicates whether the planned course of action
is viable (profitable) or not. The trickiest part of this tool is to do a thorough evaluation to ensure
all costs are factored in, and that all benefits are properly quantified.

When getting started in the process of running the numbers, it is often recommended not to use
the selling price when calculating the value. This is because the sales price will often include so
many other additional factors which may complicate the process. The best approach is to use
an activity based value.

With that being said, it is important to mention that this strategy/methodology falls under the
DMAIC method. This is a problem solving approach that can be used for quality improvements
in a company or on existing projects. The term stands for the five main steps in perfecting any
existing six sigma business process: Define, measure, analyze, improve and control.
Cost benefit analysis as a tool falls under the evaluation step; data that pertains to a given

process is collected and analyzed critically for the main purpose of determining how viable or
valid a project would be.

The DMAIC problem solving approach can play a significant role in an organization that has
implemented the six sigma methodology and tools. This five-step approach is a clearly defined
roadmap, which, when followed, ensures issues are resolved in a structured methodology.
When emphasis is put on the cost benefit analysis step, can organization can save time by
knowing the viability of a project before they start it.
Cost Benefit Application
Team members (which should include a financial person) know best how these translate to $$$.
For instance (I am not a Software Expert by any means):

Decrease in bugs could translate into a decrease in unhappy Customer calls to Tech
support. This decrease the time the company spends on answer these complains. That is $$$
spent on support personal.

Faster speed translates into increase performance which increases customer

satisfaction. That could translate into increase sales from loyal customers telling friend about
the products performance.

Now we go back to the charter and what does management want as a return on their
investment and how quickly.

Once you have all of that you can build a excel Spread sheet to see, and track, your
projects performance. In excel there are functions for the NPV & IRR listed below.

Years Costs

Benefits

Net

($10,000.00

$00.0

($10000.00)

$0.00

$2000.00 $2000.00

$0.00

$4000.00 $4000.00

$0.00

$4000.00 $4000.00

$0.00

$4000.00 $4000.00

Return wanted=

6%

Net
Value

Present $1861.92

(NPV)=

Internal Rate of

14%

Return(IRR)=

Now you can see in the example that our expected rate of return is 14% which is higher than
what management wanted which was 6% Note the Financial person can help you do the
numbers the way your companys management understands them. The hard part is working the
costs and benefits out to values everyone will agree to.
Taguchi Methods
It is essential to approach quality improvement with actual figures and proper data collection.
You should also know how to use statistical treatments in analyzing data. The Six Sigma
Process will guide you on the decisions and steps you need to make for the future health of
your company. A Six Sigma Tool called Taguchi methods employs crucial statistical and
analytical approaches that your business can use as a step toward improvement.
This theory involves loss functions. Loss is not only incurred when there are defects and
problems in the goods or services, or when the products and services fall outside of quality
standards. In the areas between the limits for quality, losses can still be incurred. With the
loss function approach, losses became broader in category. It defines them as anything that is
not efficient and may cost the consumers negatively.

With loss function, quality is really emphasized. The company should strive for quality and
should always pay it proper attention. You cannot just cut down costs across the board
because often times, reductions in costs negatively affect quality. When your goal is simply to
reduce expenses, the quality of your goods or services often is decreased. Ultimately, with a
decrease in quality comes a decrease in sales, customer satisfaction, and repeat business;
and further, leading to a decrease in profits.
Quality can actually be improved without increasing costs; this is where the Six Sigma Theory
comes in handy. The key is to maximize the present system or the resources that are already
there. The company should strive to reduce waste. It should be really efficient in managing its
resources, time, and effort. It then leads to better quality without having to add expense. This
is a practical and wise approach for improving quality.
The goal of any company should always be to maximize profits while improving quality; an
infinitely better goal than solely to reduce costs. Ultimately, when quality and process
efficiency is improved, business costs are also reduced.
The loss function also emphasizes the importance of reducing variation. Variation always
leads to waste and poor quality. It can also bring about changes in output and can be a
source of defects. When variations are controlled, performance and quality will improve as a
consequence.
Off line quality control is another method. It helps in the reduction of the variation through
proper design. The system design, parameter design, and tolerance design of a product or
service should all be optimized so variations are limited.
Six Sigma tools such as Taguchi methods can be applied to all companies in need of
increased quality control. They should be applied wisely and with good knowledge. It will
ensure that the application will really help boost the company and its performance.
Taguchi loss function is a way to show how each non-perfect part produced, results in a loss for
the company. Deming states that it shows
"a minimal loss at the nominal value, and an ever-increasing loss with departure either way from
the nominal value." - W. Edwards Deming Out of the Crisis.
Application
A company that manufactures parts that require a large amount of machining grew tired of the
high costs of tooling. To avoid premature replacement of these expensive tools, the manager
suggested that operators set the machine to run at the high-end of the specification limits. As
the tool would wear down, the products would end up measuring on the low-end of the
specification limits. So, the machine would start by producing parts on the high-end and after a
period of time, the machine would produce parts that fell just inside of the specs.

The variation of parts produced on this machine was much greater than it should be, since the
strategy was to use the entire spec width allowed rather than produce the highest quality part
possible. Products may fall within spec, but will not produce close to the nominal. Several of
these "good parts" may not assemble well, may require recall, or may come back under
warranty. The Taguchi loss would be very high.
We should consider these vital questions:
* Is the savings of tool life worth the cost of poor products?
* Would it be better to replace the tool twice as often, reduce variation, or look at incoming part
quality?
Calculations
Formulas:
Loss at a point: L(x) = k*(x-t)^2
where,
k = loss coefficient
x = measured value
t = target value
Average Loss of a sample set: L = k*(s^2 + (pm - t)^2)
where,
s = standard deviation of sample
pm = process mean
Total Loss = Avg. Loss * number of samples
For example: A medical company produces a part that has a hole measuring 0.5" + 0.050".
The tooling used to make the hole is worn and needs replacing, but management doesn't feel it
necessary since it still makes "good parts". All parts pass QC, but several parts have been
rejected by assembly. A failure cost per part is $45.00 Using the loss function, explain why it
may be to the benefit of the company and customer to replace or sharpen the tool more
frequently. Use the data below:
Measured Value
0.459 | 0.478 | 0.495 | 0.501 | 0.511 | 0.527
0.462 | 0.483 | 0.495 | 0.501 | 0.516 | 0.532
0.467 | 0.489 | 0.495 | 0.502 | 0.521 | 0.532
0.474 | 0.491 | 0.498 | 0.505 | 0.524 | 0.533
0.476 | 0.492 | 0.500 | 0.509 | 0.527 | 0.536
Solution:
The average of the points is 0.501 and the standard deviation is about 0.022.

find k,
using L(x) = k * (x-t)^2
$45.00 = k * (0.550 - 0.500)^2
k = 18000
next,
using the Average loss equation: L=k * (s^2 + (pm - t)^2)
L = 18000 * (.022^2 + (.501 - .500)^2) = 8.73
So the average loss per part in this set is $8.73.
For the loss of the total 30 parts produced,
= L * number of samples
= $8.73 * 30
= $261.90
From the calculations above, one can determine that at 0.500", no loss is experienced. At a
measured value of 0.501", the loss is $0.018, and with a value of 0.536", the loss would be as
much as $23.00.
Even though all measurements were within specification limits and the average hole size was
0.501", the Taguchi loss shows that the company lost about $261.90 per 30 parts being made.
If the batch size was increased to 1000 parts, then the loss would be $8730 per batch. Due to
variation being caused by the old tooling, the department is losing a significant amount of
money.
From the chart, we can see that deviation from the nominal could cost as much as $0.30 per
part. In addition we would want to investigate whether this kind of deviation would compromise
the integrity of the final product after assembly to the point of product failure.